ITO 15(2)(4), MUMBAI v. POONAM CONSTRUCITON, MUMBAI

1 ITA NO.2003 & 2052/MUM/2010 IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI C CC C BENCH BENCH BENCH BENCH MUMBAI BENCHES MUMBAI MUMBAI BENCHES MUMBAI MUMBAI BENCHES MUMBAI MUMBAI BENCHES MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI R V EASWAR SHRI R V EASWAR SHRI R V EASWAR SHRI R V EASWAR PRESIDENT & PRESIDENT & PRESIDENT & PRESIDENT & SHRI SHRI SHRI SHRI R K PANDA AM R K PANDA AM R K PANDA AM R K PANDA AM ITA NO. ITA NO. ITA NO. ITA NO. 2003/MUM/2010 2003/MUM/2010 2003/MUM/2010 2003/MUM/2010 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR 2006 2006 2006 2006- -- -07 0707 07 ) )) ) THE INCOME TAX WARD 15(2)(4 MUMBAI VS POONAM CONSTRUCTION 201 2 ND FLOOR SHARAD RESIDENCY CHANDRAVARKAR ROAD BORIVALI (W) - MUMBAI 92 ( (( (APPELLANT APPELLANT APPELLANT APPELLANT) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO.AAAAP3908K AAAAP3908K AAAAP3908K AAAAP3908K ITA NO. ITA NO. ITA NO. ITA NO. 2052/MUM/2010 2052/MUM/2010 2052/MUM/2010 2052/MUM/2010 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR 2006 2006 2006 2006- -- -07) 07) 07) 07) THE INCOME TAX WARD 15(2)(4 MUMBAI VS POONAM GRUH NIRMAN GR FLOOR OUT HOUSE SHALESH BLDG LINKING ROAD SANTA CRUZ (W) MUMBAI 54 (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. AAGFP5336C PAN NO. AAGFP5336C PAN NO. AAGFP5336C PAN NO. AAGFP5336C ASSESSEE BY SRI SASHI TULISYAN REVENUE BY SHRI AJIT KUMAR SINHA/R K SAHCE PER R K PANDA AM PER R K PANDA AM PER R K PANDA AM PER R K PANDA AM THE ABOVE TWO APPEALS BY THE REVENUE IN RESPECT OF TWO DIFFERENT ASSESSEES ARE DIRECTED AGAINST THE SEPARATE ORDERS DATED 15.1.20010 AND 14.1.2010 OF THE CIT(A) - 26 MUMBAI RELATING TO AY 2006-07. SINCE IDENTICAL GROUNDS HAVE BEEN TAKEN BY THE REVENUE IN BOTH THE APPEALS; THEREFORE THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS COMMON ORDER. 2 ITA NO.2003 & 2052/MUM/2010 ITA NO. 2003/MUM/2010 (BY POONAM CONSTRUCTION) ITA NO. 2003/MUM/2010 (BY POONAM CONSTRUCTION) ITA NO. 2003/MUM/2010 (BY POONAM CONSTRUCTION) ITA NO. 2003/MUM/2010 (BY POONAM CONSTRUCTION) 2 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E IS AN AOP AND CAME INTO EXISTENCE IN TERMS OF A JOINT VENTURE AGREEMENT DAT ED 5.3.2004 BETWEEN SHRI HARSHADRAI POONAMCHAND DOSHI SHRI CHANDRAKANT J DO SHI (HUF) SHRI HEMAL J DOSHI AND SHRI HITESH K SHAH (HUF). THE ASSESSING O FFICER NOTED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS CONTINUE D WITH THE ONGOING PROJECTS VIZ. CONSTRUCTION OF HOUSING PROJECT KNOWN AS POON AM SAGAR COMPLEX AT MIRA ROAD (EAST) DIST THANE CONSISTING OF FOUR BUILDIN G NAMELY J-55 J-56 I-62 & I-63 CONSISTING OF 118 RESIDENTIAL FLATS AND 28 SHOPS HA VING TOTAL CONSTRUCTION AREA OF 70 559 SQ.FT WHICH INCLUDES RESIDENTIAL AREA OF 66 177 SQFT AND COMMERCIAL AREA OF 4382.SQFT. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS COMPLETED THE HOUSING PROJECT AND DECLARED NET PROFIT ON THE SAME AT ` 4 68 03 762/-. THE ASSESSEE CLAIMED DEDUCTION U/S 80IB(10) ON THE ENTI RE PROFIT SO DECLARED FROM THE RESIDENTIAL PROJECT. 2.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS T HE ASSESSEE ALSO FILED VARIOUS DOCUMENTS SUCH AS COMMENCEMENT CERTIFICATE PROJECT COMPLETION CERTIFICATE FROM THE ARCHITECT AND OCCUPATION CERTI FICATE TO JUSTIFY THE CLAIM OF DEDUCTION U/S 80IB(10). ON VERIFICATION OF THE DET AILS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE COMMERCIAL AREA OF SHOPS INCLUDED IN THE ASSESEES PROJECT IS 4382 SQ.FT WHICH IS IN EXCESS OF THE PERMISSIBLE LIMITS LAID DOWN IN CLAUSE (D) OF SEC. 80IB(10) OF THE I T ACT. 2.2 ON BEING QUESTIONED BY THE ASSESSING OFFICER TO JUSTIFY THE CLAIM OF DEDUCTION U/S 80IB(10) WHEN THE COMMERCIAL AREA INC LUDED IN THE PROJECT 3 ITA NO.2003 & 2052/MUM/2010 EXCEEDED THE LIMIT OF 2000 SQ.FT AS PER THE PROVISI ONS OF SEC. 80IB(10)(D) IT WAS SUBMITTED THAT THE SAID CLAUSE (D) OF SEC. 80IB HAS BEEN INSERTED BY THE FINANCE ACT 2004 W.E.F 1.4.2005 AND THE AMENDMENT WAS NOT APPLICABLE TO ITS PROJECT WHICH WAS APPROVED PRIOR TO 31.3.2005. SINCE ITS HOUSING PROJECT WAS FIRST APPROVED VIDE CERTIFICATE OF COMMENCEMENT DATED 19 .7.2003 THE ASSESSEE HAS RIGHTLY CLAIMED THE DEDUCTION U/S 80IB(10). 2.3 HOWEVER THE ASSESSING OFFICER WAS NOT SATISFIE D WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE NOTED THAT CLAUSE (D) OF SEC. 80IB(10) WAS INTRODUCED BY THE FINANCE ACT 2004 W.E.F 1.4.2005 AND IT RESTRICTED THE BUILT UP AREA OF THE SHOPS AND OTHER COMMERCIAL ESTABLISHMEN TS INCLUDED IN THE HOUSING PROJECT TO 5% OF THE BUILT UP AREA OF THE HOUSING P ROJECT OR 2000 SQ.FT WHICHEVER IS LESS. THEREFORE W.E.F ASSESSMENT YEAR 2005-06 ONWARDS IN ORDER TO BE ELIGIBLE FOR THE DEDUCTION U/S 80IB(10) A HOUSING PROJECT HAS TO FULFIL ALL THE CONDITIONS LAID DOWN IN CLAUSE (A)(B) (C ) AND (D) OF SEC. 80IB(10). SINCE THE AREA OF SHOPS AND COMMERCIAL ESTABLISHMENTS IN THE HOUSING PROJECT OF THE ASSESSEE IS ADMITTEDLY 4382 SQ.FT WHICH IS IN EX CESS OF 2000 SQ.FT; THEREFORE THE ASSESSEE VIOLATED THE CONDITION LAID DOWN IN CLAUSE (D) OF SEC. 80(B(10). HE ACCORDINGLY DISALLOWED THE CLAIM OF DEDUCTION U/S 8 0IB(10) OF THE IT ACT AND BROUGHT THE ENTIRE AMOUNT OF ` 4 68 03 760/- TO TAX. 3 BEFORE THE CIT(A) THE ASSESSEE REITERATED THE S AME SUBMISSIONS AS MADE BEFORE THE ASSESSING OFFICER. IT WAS SUBMITTED THA T CLAUSE (D) OF SEC. 80IB(10) RESTRICTING THE COMMERCIAL AREA UP TO 5% OF THE AGG REGATE BUILT UP AREA OF THE HOUSING PROJECT OR 2000 SQ.FT WHICH IS LESS HAS B EEN INSERTED BY THE FINANCE 4 ITA NO.2003 & 2052/MUM/2010 ACT 2004 PRESENTED IN AUGUST 2004 W.E.F. 1.4.2005 AND GOT FINAL ASSENT OF THE HONBLE PRESIDENT ON 10.9.2004 BEFORE WHICH THE ENT IRE COMMERCIAL AREA WAS BOOKED/SOLD BY THE ASSESSEE. THEREFORE THE INSERTI ON OF CLAUSE (D) IN SEC. 80IB(10) W.E.F 1.4.2005 SHALL NOT APPLY TO THE PROJ ECTS APPROVED BEFORE 31.3.2005 AS SUCH SINCE IT WAS NOT ON THE STATUTE I N THE PREVIOUS YEARS UNDER WHICH SUCH PROJECTS GOT APPROVED AND COMMENCED ITS CONSTRUCTION. VARIOUS CASE DECISIONS WERE BROUGHT TO THE NOTICE OF THE CIT(A) AND IT WAS SUBMITTED THAT UNDER IDENTICAL FACTS AND CIRCUMSTANCES THE CIT(A ) AND THE TRIBUNAL HAVE TAKEN A VIEW THAT THE BASIS OF THE AMENDMENT TO THE PROV ISIONS OF SEC. 80IB(10) (D) SHOULD BE MADE APPLICABLE WITH REFERENCE TO THE DAT E OF THE APPROVAL OF THE HOUSING PROJECT. THE DECISION OF THE TRIBUNAL IN T HE CASE OF SAROJ SALES ORGANIZATION VS ITO REPORTED IN 115 TTJ 485 (MUM) W AS ALSO BROUGHT TO THE NOTICE OF THE CIT(A). 4 BASED ON THE VARIOUS ARGUMENTS ADVANCED BY THE AS SESSEE AND FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF SAROJ S ALES ORGANIZATION(SUPRA) AND A NUMBER OF OTHER DECISIONS INCLUDING THE DECISION O F THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BRAHMAN ASSOCIATES VS JCIT REPORTED IN 119 ITD 255 THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE. 5 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS: I) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND LAW THE LD CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IB(10) OF RS 4 68 03 760/- IGNORING THE FACTS THE ITAT SPECIAL BENCH PUNE (2009) 30 SOT 155 IN THE CASE OF M/S BRAHMHA A SSOCIATES HAS 5 ITA NO.2003 & 2052/MUM/2010 CATEGORICALLY HELD THAT THE PROVISIONS OF CLAUSE (D ) OF SEC. 80IB(10) INSERTED BY FINANCE ACT 2004 W.E.F 1.4.2005 HAS NO RETROSPECTIVE EFFECT AND APPLIED ONLY W.E.F 1.4.2005 RELEVANT TO ASSESSM ENT YEAR 2005-06 AND ONWARDS WHICH AHS BINDING EFFECT IN THIS CASE. II) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E AND LAW THE LD CIT(A) HAS IN LAW ERRED IN HOLDING THAT THE ASSESSEE IS EN TITLED TO DEDUCTION U/S 80IB(1) OF ` 4 68 03 760/- IGNORING THE CLEAR CUT APPLICABILITY OF SEC 80IB(10) (D) WHICH IS VERY MUCH APPLICABLE IN THE P RESENT CASE. III) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CA SE AND LAW THE LD CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IB(10) OF ` 4 68 03 760/- BASED ON IRRELEVANT FACT OF APPROVAL OF PLAN OF PROJECT EARLIER TO 1.4.2005 WITHOUT ANY LEGAL MANDATE. 6 THE LD COUNSEL FOR THE ASSESSEE AT THE OUTSET SU BMITTED THAT THE ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE BY THE DEC ISION OF THE TRIBUNAL IN THE CASE OF SAROJ SALES ORGANIZATION (SUPRA) AND THE DE CISION OF THE TRIBUNAL IN THE CASE OF HIRANANDANI AKRUTI JV VS DCIT REPORTED IN 39 SOT 498(MUM). 6.1 REFERRING TO PARA 13 OF THE ORDER OF THE TRIBUN AL IN THE CASE OF SAROJ SALES ORGANISATION HE DREW THE ATTENTION OF THE BENCH TO THE OBSERVATIONS WHERE IN IT HAS BEEN HELD AS UNDER: 13. AS REGARDS THE OBJECTION OF THE AO THAT THE PER MISSIBLE SHOPPING AREA OF HOUSING PROJECT EXCEEDS 5 PER CENT THE ASSESSEE IS NOT ENTITLED FOR RELIEF UNDER S. 80-IB(10). WE ARE OF THE VIEW THAT THE HOUSING PROJECT WAS APPROVED BEFORE 31ST MARCH 2005 AND FOR SUCH PROJE CTS WHICH WERE SO APPROVED THERE WAS NO STIPULATION AS TO THE SHOPPI NG COMPLEX AREA PERMISSIBLE IN THE PROJECT. AS ALREADY STATED EARLI ER THAT THE AMENDMENTS WERE SUBSEQUENTLY MADE WHILE EXTENDING THE DEDUCTIO N OF INCOME FROM HOUSING PROJECT APPROVED UPTO 31ST MARCH 2007 THE DENIAL OF DEDUCTION IN OUR VIEW IS CLEARLY NOT IN ACCORDANCE WITH LAW. 6 ITA NO.2003 & 2052/MUM/2010 6.2 REFERRING TO THE DECISION OF THE TRIBUNAL IN TH E CASE OF HIRANANDANI AKRUTI JV (SUPRA) HE SUBMITTED THAT THE TRIBUNAL FOLLOWIN G THE DECISION IN THE CASE OF SAROJ SALES ORGANISATION (SUPRA) HAS HELD THAT THE LAW AS IT EXISTED IN THE ASSESSMENT YEAR 2004-05 WHEN THE ASSESSEE SUBMITTED ITS PROPOSAL FOR SLUM REHABILITATION AND THE PERMISSION FOR CARRYING OUT THE DEVELOPMENT WAS ACCORDED ON 17.11.2003 IS TO BE APPLIED. HE ACCORDINGLY S UBMITTED THAT THE ORDER OF THE CIT(A) WAS IN CONSONANCE WITH THE DECISION OF THE COORDINATE BENCHES OF THE TRIBUNAL; THEREFORE THE SAME HAS TO BE UPHELD AND THE GROUND RAISED BY THE REVENUE SHOULD BE DISMISSED. 6.3 THE LD DR WHILE SUPPORTING THE ORDER OF THE ASS ESSING OFFICER FAIRLY CONCEDED THAT THIS ISSUE STANDS COVERED IN FAVOUR O F THE ASSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE TRIBUNAL RELIED ON BY THE LD COUNSEL FOR THE ASSESSEE. 7 WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE PARTIES PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE H AVE ALSO CONSIDERED THE TWO DECISIONS RELIED ON BY THE LD COUNSEL FOR THE ASSES SEE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS UNDERTAKEN A HOUSING PRO JECT AT THE PLOT OF SIZE OF LAND OF 243103.25 SQ.FT AND THE PLAN OF CONSTRUCTIO N OF HOUSING PROJECT HAVE BEEN APPROVED BY THE LOCAL AUTHORITY I.E. MIRA BHY ANDER MUNICIPAL CORPORATION BY LETTER DATED 19.7.2003. THERE IS ALSO NO DISPUT E TO THE FACT THAT THE ASSESSEE HAS OBTAINED OCCUPATION CERTIFICATE FROM THE LOCA L AUTHORITY OF BLDG. NO.55 & 56 TYPE I ; 62 & 63 TYPE J ON 12.7.2005. WE FIND THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEDUCTION U/S 80IB(10) ON THE GROUND T HAT AS PER CLAUSE (D) OF SEC. 7 ITA NO.2003 & 2052/MUM/2010 80IB(10) THE BUILT UP AREAS OF SHOPS AND COMMERCIAL ESTABLISHMENTS IN THE HOUSING PROJECT IS 4382 SQ.FT WHICH IS IN EXCESS OF 2000 SQ.FT. WE FIND THE CIT(A) DELETED THE DISALLOWANCE FOLLOWING THE DECI SION OF THE TRIBUNAL IN THE CASE OF SAROJ SALES ORGANISATION (SUPRA) AND A HOST OF OTHER DECISIONS. WE FIND THE LD CIT(A) WHILE ALLOWING THE CLAIM OF THE ASSESSEE HAS ALSO CONSIDERED THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF BRAHMA ASSOCIATES (SUPRA). WE FIND THE ISSUE STANDS COVERED IN FAVOU R OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE CASE OF HIRANANDANI AKRUTI JV (SUPRA). 7.2 WE FIND THE TRIBUNAL IN THE ABOVEMENTIONED DEC ISION HAS FOLLOWED THE DECISION OF THE TRIBUNAL IN THE CASE OF SAROJ SALES ORGANISATION (SUPRA) AND AT PARAS 24 TO 27 HAVE HELD AS UNDER: 24. NOW WE WILL DEAL WITH MAIN ISSUE IN THIS APPEAL I.E. WHETHER THE LAW AS IT EXISTED IN THE ASST. YR. 2004-05 WHEN THE ASS ESSEE SUBMITTED ITS PROPOSAL FOR SLUM REHABILITATION AND THE PERMISSION FOR CARRYING OUT THE DEVELOPMENT WAS ACCORDED ON 17TH NOV. 2003 AND WHE N THE ASSESSEE COMMENCED DEVELOPMENT IS TO BE APPLIED OR THE LAW A S AMENDED BY THE FINANCE ACT 2005 W.E.F. 1ST APRIL 2005 WHEREBY IT WAS LAID DOWN THAT THE BUILT-UP AREA OF THE SHOPS AND COMMERCIAL ESTABLISH MENT INCLUDED IN THE HOUSING PROJECT SHOULD NOT BE MORE THAN5 PER CENT O F THE TOTAL BUILT-UP ARE OF THE PROJECT OR 2 000 SQ. FT. WHICHEVER IS LE SS IS TO BE APPLIED ? ON THE ABOVE ISSUE WE HAVE ALREADY NOTICED THAT CO-OR DINATE BENCHES OF TRIBUNAL HAVE ALREADY EXPRESSED OPINION. THE DECISI ON IN THE CASE OF SAROJ SALES ORGANISATION (SUPRA) IS DIRECTLY ON THE ISSUE. JUDICIAL DISCIPLINE DEMANDS THAT WE SHOULD FOLLOW DECISION OF A CO-ORDI NATE BENCH ON IDENTICAL FACTS. 25. THE PROVISIONS OF S. 80-IB(10) AS IT STOOD AT D IFFERENT PERIODS HAVE ALREADY BEEN GIVEN BY US. AN ANALYSIS OF THE SAME S HOWS THE FOLLOWING CONDITIONS WERE REQUIRED TO BE SATISFIED AT VARIOUS POINT OF TIME : ASST. YR. CONDITIONS 2000-01 (A) HOUSING PROJECT TO BE APPROVED BY LO CAL AUTHORITY (B) PROJECT TO COMMENCE ON OR AFTER 1-10-1998 (C) PROJECT WAS TO BE COMPLETED BEFORE 31-3-2001 8 ITA NO.2003 & 2052/MUM/2010 (D) SIZE OF THE PLOT OF LAND FOR THE PROJECT SHOULD HAVE A MINIMUM OF 1 ACRE. 2001-02 (A) HOUSING PROJECT TO BE APPROVED BY LO CAL AUTHORITY (B) PROJECT TO COMMENCE ON OR AFTE R 1-10-1998 (C) PROJECT WAS TO BE COMPLETED BE FORE 31-3-2001 (D) SIZE OF THE PLOT OF LAND FOR T HE PROJECT SHOULD HAVE A MINIMUM OF 1 ACRE. (E) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP ARE A OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITY OF DELHI OR MUMBAI OR WITHIN TWENTY -FIVE KILOMETRES FROM THE MUNICIPAL LIMITS OF THESE CITIE S AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE. 2002-03 (A) HOUSING PROJECT TO BE APPROVED BY LO CAL AUTHORITY (B) PROJECT TO BE APPROVED BY LOC AL AUTHORITY BEFORE 31-3-2001 (C) PROJECT WAS TO COMMENCE ON OR AFTER 1-10-1998 (D) SIZE OF THE PLOT OF LAND FOR THE PROJECT SHOULD HAVE A MINIMUM OF 1 ACRE. (E) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP ARE A OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITY OF DELHI OR MUMBAI OR WITHIN TWENTY -FIVE KILOMETRES FROM THE MUNICIPAL LIMITS OF THESE CITIE S AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE. 2003-04 & 2004-05 (A) HOUSING PROJECT TO BE APPROVED BY LO CAL AUTHORITY (B) PROJECT TO BE APPROVED BY LOCAL AUTHORI TY BEFORE 31-3-2005 (C) PROJECT WAS TO COMMENCE ON OR AF TER 1-10-1998 (D) SIZE OF THE PLOT OF LAND FOR THE PROJECT SHOULD HAVE A MINIMUM OF 1 ACRE. (E) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP ARE A OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITY OF DELHI OR MUMBAI OR WITHIN TWENTY -FIVE KILOMETRES FROM THE MUNICIPAL LIMITS OF THESE CITIE S AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE. 2005-06 (A) HOUSING PROJECT TO BE APPROVED BY LOC AL AUTHORITY (B) PROJECT TO BE APPROVED BEFORE 31-3-2007 (C) PROJECT WAS TO COMMENCE ON OR AFTER 1-10-1998 9 ITA NO.2003 & 2052/MUM/2010 (D) THE PROJECT WAS TO BE COMPLETED BEFORE 31-3-200 8 IF THE APPROVAL WAS GIVEN BY A LOCAL AUTHORITY BEFORE 1-4- 2004 AND WITHIN 4 YEARS FROM THE END OF THE FINANCIAL YEAR I N WHICH THE APPROVAL CAME WHERE THE APPROVAL WAS GIVEN ON OR AF TER 1-4- 2004. (E) SIZE OF THE PLOT OF LAND FOR THE PROJECT SHOULD HAVE A MINIMUM OF 1 ACRE. (F) THE RESIDENTIAL UNIT HAS A MAXIMUM BUILT-UP ARE A OF ONE THOUSAND SQUARE FEET WHERE SUCH RESIDENTIAL UNIT IS SITUATED WITHIN THE CITY OF DELHI OR MUMBAI OR WITHIN TWENTY -FIVE KILOMETRES FROM THE MUNICIPAL LIMITS OF THESE CITIE S AND ONE THOUSAND AND FIVE HUNDRED SQUARE FEET AT ANY OTHER PLACE. (G) THE BUILT-UP AREA OF THE SHOPS AND COMMERCIAL ESTABLISHMENT INCLUDED IN THE HOUSING PROJECT SHOUL D NOT BE MORE THAN 5% OF THE TOTAL BUILT-UP AREA OF THE PROJ ECT OR 2 000 SQ. FT. WHICHEVER IS LESS. IT IS NOTICED THAT THE PROVISIONS AS IT STOOD AT DI FFERENT POINT OF TIME UNIFORMLY CONTEMPLATES APPROVAL BY LOCAL AUTHORITY. FROM ASST. YR. 2002- 03 TIME OF APPROVAL BY THE LOCAL AUTHORITY ASSUMED IMPORTANCE. COMMENCEMENT OF PROJECT IS NOT OF ANY IMPORTANCE BE CAUSE IT DATES BACK TO 1ST OCT. 1998 THE STARTING POINT WHEN THE INCENTIVE PROVISION PROVIDING FOR DEDUCTION OF PROFITS FROM HOUSING PRO JECTS WERE INTRODUCED. UP TO ASST. YR. 2004-05 THE PROVISION DID NOT IMPO SE ANY PERIOD WITHIN WHICH THE PROJECT HAS TO BE COMPLETED EXCEPT IN AS ST. YRS. 2000-01 AND 2001-02. IN ASST. YR. 2001-02 THE CONDITION WAS TH AT THE PROJECT SHOULD BE COMPLETED BEFORE 31ST MARCH 2003. FROM ASST. YR . 2005-06 THE TIME WITHIN WHICH THE PROJECT HAS TO BE COMPLETED HAS BE EN GIVEN IMPORTANCE. 26. THERE IS TRUTH IN THE PLEA OF HARDSHIP PUT FORT H ON BEHALF OF THE ASSESSEE. LET US ASSUME AN ASSESSEE APPLIES AND OBT AINS APPROVAL OF A LOCAL AUTHORITY FOR BUILDING A HOUSING PROJECT IN T HE PREVIOUS YEAR RELEVANT TO ASST. YR. 2002-03. AS PER THE LAW AS IT STOOD IN THE PREVIOUS YEAR RELEVANT TO ASST. YR. 2002-03 UP TO 2004-05 THERE WAS NO TIME-LIMIT WITHIN WHICH THE CONSTRUCTION HAS TO BE COMPLETED O R ANY RESTRICTION REGARDING COMMERCIAL AREA THAT CAN BE BUILT IN A HO USING PROJECT. LET US ASSUME THAT THE ASSESSEE COMPLIES WITH ALL THE COND ITIONS FOR ALLOWING RELIEF UNDER S. 80-IB(10) I.E. IT IS APPROVED AS A HOUSING PROJECT BY THE LOCAL AUTHORITY BUT THE AREA OF COMMERCIAL SPACE AS APPROVED BY THE LOCAL AUTHORITY IS MORE THAN 2 000 SQ. FT. THE ASSESSEE C OMMENCES THE PROJECT BUT IS ABLE TO COMPLETE ONLY IN THE PREVIOUS YEAR R ELEVANT TO ASST. YR. 2005-06. AS PER THE CHANGE IN LAW FROM ASST. YR. 20 05-06 WITH REGARD TO THE AREA OF COMMERCIAL SPACE IN A HOUSING PROJECT T HE ASSESSEE WOULD LOOSE HIS ELIGIBILITY TO CLAIM DEDUCTION. IN SUCH C ASES THERE IS DEFINITELY GRAVE HARDSHIP TO THE ASSESSEE. THE INTERPRETATION SOUGHT TO BE CANVASSED BY THE LEARNED DEPARTMENTAL REPRESENTATIV E WILL ALSO LEAD TO ABSURD SITUATION. LET US ASSUME AN ASSESSEE OBTAINS APPROVAL OF A HOUSING PROJECT PRIOR TO 1ST APRIL 2005 SAY IN PRE VIOUS YEAR RELEVANT TO ASST. YR. 2002-03. HE BUILDS COMMERCIAL SPACE IN EX CESS OF 2 000 SQ. FT. IN THE HOUSING PROJECT. HE FOLLOWS PERCENTAGE COMPLETI ON METHOD OF ACCOUNTING AND OFFERS PROFITS IN ASST. YRS. 2002-03 TO 2004-05 CLAIMS 10 ITA NO.2003 & 2052/MUM/2010 EXEMPTION UNDER S. 80-IB(10) AND IS ALLOWED EXEMPTI ON. ON THE SAME PROJECT IN ASST. YR. 2005-06 THE ASSESSEE WOULD NO T GET THE BENEFIT OF S. 80-IB(10). WE THEREFORE FIND NO GROUNDS TO TAKE A VIEW DIFFERENT FROM THE ONE TAKEN BY THE CO-ORDINATE BENCH OF THE TRIBU NAL IN THE CASE OF SAROJ SALES ORGANISATION (SUPRA). 27. WE ARE OF THE VIEW THAT WE ARE NOT SUPPLYING AN Y WORDS TO THE 'STATUTE BUT ARE ONLY HOLDING THAT THE LAW AS IT EX ISTED IN THE ASST. YR. 2004-05 WHEN THE ASSESSEE SUBMITTED ITS PROPOSAL FO R SLUM REHABILITATION AND THE PERMISSION FOR CARRYING OUT THE DEVELOPMENT WAS ACCORDED ON 17TH NOV. 2003 AND WHEN THE ASSESSEE COMMENCED DEV ELOPMENT IS TO BE APPLIED. THEREFORE THE SUBMISSIONS OF THE LEARN ED DEPARTMENTAL REPRESENTATIVE IN THIS REGARD CANNOT BE ACCEPTED. W E ARE OF THE VIEW THAT THE LEGISLATURE WOULD NOT HAVE INTENDED TO TAK E AWAY A VESTED RIGHT WITHOUT CLEAR WORDS TO THAT EFFECT IN THE PROVISION S OF S. 80-IB(10) AS AMENDED BY THE FINANCE ACT 2005 W.E.F. 1ST APRIL 2005. WE THEREFORE HOLD FOLLOWING THE DECISION IN THE CASE OF SAROJ SA LES ORGANISATION (SUPRA) THAT THE LAW AS IT EXISTED IN THE ASST. YR. 2004-05 WHEN THE ASSESSEE SUBMITTED ITS PROPOSAL FOR SLUM REHABILITATION AND THE PERMISSION FOR CARRYING OUT THE DEVELOPMENT WAS ACCORDED ON 17TH N OV. 2003 AND WHEN THE ASSESSEE COMMENCED DEVELOPMENT IS TO BE AP PLIED. 7 RESPECTFULLY FOLLOWING THE DECISION OF THE COORDI NATE BENCHES OF THE TRIBUNAL IN THE CASE OF HIRANANDANI AKRUTI JV (SUP RA) AND THE DECISION IN THE CASE OF SAROJ SALES ORGANISATION (SUPRA) AND IN ABSENCE OF ANY CONTRARY DECISION OR DISTINGUISHABLE FEATURE BROUGHT ON RECORD BY THE L D DR WE FIND NO INFIRMITY IN THE ORDER OF THE LD CIT(A) DELETING THE DISALLOWANC E. THE GROUNDS RAISED BY THE REVENUE ARE ACCORDINGLY DISMISSED. ITA NO. 2052/MUM/2010 (BY POONAM ITA NO. 2052/MUM/2010 (BY POONAM ITA NO. 2052/MUM/2010 (BY POONAM ITA NO. 2052/MUM/2010 (BY POONAM G GG GRUH NIRMAN) RUH NIRMAN) RUH NIRMAN) RUH NIRMAN) 8 THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS UNDER: I) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND LAW THE LD CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IB(10) OF RS 88 32 430/- IGNORING THE FACTS THE I TAT SPECIAL BENCH PUNE (2009) 30 SOT 155 IN THE CASE OF M/S BRAHMHA ASSOCI ATES HAS CATEGORICALLY HELD THAT THE PROVISIONS OF CLAUSE (D ) OF SEC. 80IB(10) INSERTED BY FINANCE ACT 2004 W.E.F 1.4.2005 HAS NO RETROSPECTIVE EFFECT 11 ITA NO.2003 & 2052/MUM/2010 AND APPLIED ONLY W.E.F 1.4.2005 RELEVANT TO ASSESSM ENT YEAR 2005-06 AND ONWARDS WHICH AHS BINDING EFFECT IN THIS CASE. II) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E AND LAW THE LD CIT(A) HAS IN LAW ERRED IN HOLDING THAT THE ASSESSEE IS EN TITLED TO DEDUCTION U/S 80IB(1) OF ` 88 32 430/- IGNORING THE CLEAR CUT APPLICABILITY O F SEC 80IB(10) (D) WHICH IS VERY MUCH APPLICABLE IN THE PRESENT CA SE. III) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CA SE AND LAW THE LD CIT(A) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IB(10) OF ` 88 32 430/- BASED ON IRRELEVANT FACT OF APPROVAL O F PLAN OF PROJECT EARLIER TO 1.4.2005 WITHOUT ANY LEGAL MANDATE. 9 AFTER HEARING BOTH THE SIDES WE FIND THE GROUNDS RAISED IN THE IMPUGNED APPEAL ARE IDENTICAL TO THE GROUNDS OF APPEAL RAISE D IN ITA NO. 2003/MUM/2010. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS R AISED BY THE REVENUE HAVE BEEN DISMISSED. FOLLOWING THE SAME RATIO THE GROU NDS OF APPEAL IN THE IMPUGNED APPEAL ARE ALSO DISMISSED. 10 IN THE RESULT BOTH THE APPEALS FILED BY THE REV ENUE ARE DISMISSED. ORDER PRONOUNCED ON THE 11 TH DAY OF FEB 2011. SD/- SD/- ( (( ( R V EA R V EA R V EA R V EAS SS SWAR WAR WAR WAR ) )) ) PRESIDENT ( (( ( R K PANDA R K PANDA R K PANDA R K PANDA ) )) ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED:11 TH FEB 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR ITAT MUMBAI